Strong time-consistency in the cartel-versus-fringe model

F. Groot, C.A.A.M. Withagen, A.J. Zeeuw, de

Research output: Contribution to journalArticleAcademicpeer-review

43 Citations (Scopus)

Abstract

Due to developments on the oil market in the 1970s, the theory of exhaustible resources was extended with the cartel-versus-fringe model to characterize markets with one big coherent cartel and a large number of small suppliers called the fringe. Because cartel and fringe are leader and follower, the von Stackelberg solution concept is appropriate for the supply side of this market. The solution for the cartel-versus-fringe model, presented in the previous literature, proved to be time-inconsistent for a large plausible range of values for extraction costs and initial reserves. This paper provides a (strongly) time-consistent solution for the cartel-versus-fringe model.
Original languageEnglish
Pages (from-to)287-306
JournalJournal of Economic Dynamics and Control
Volume28
Issue number2
DOIs
Publication statusPublished - 2003

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